Super-chip hype doesn't solve Motorola's dilemma

Despite the fanfare with which Motorola Inc. trumpeted its new semiconductor technology last week, investors greeted the news with some well-deserved skepticism. Motorola's shares barely budged last Tuesday, even as executives at the beleaguered Schaumburg electronics giant hailed their mixture of gallium arsenide and silicon as the Holy Grail of chip technology, certain to usher in a new era of lightning-fast processing speeds and heretofore unimagined applications.

One can hope that the static share price shows that investors aren't allowing the hyperbole to distract them from the long-standing problems at Motorola's stumbling chip business. Clamor from big shareholders who want Motorola to sell the unit has grown louder lately, forcing President and Chief Operating Officer Robert L. Growney into the grudging concession a few weeks ago that the company's promise to shed underperforming units applied to the semiconductor business, too. Now comes the revelation that Motorola has developed a miraculous new chip that will leapfrog rivals  when it's ready for production in two years.

Intentionally or not, the announcement had the ring of a diversion designed to defuse pressure to dump the semiconductor unit long enough for management to figure out how to fix a chronic also-ran that survives mainly by selling chips to other Motorola businesses.

In any case, the new technology is far from a sure thing. The chip has reached unprecedented processing speeds in the controlled conditions of a laboratory, but nobody knows how well it will handle the demands of real-world applications or withstand the stress of high-volume manufacturing. And there's no guarantee that semiconductor rivals, many of which are working on their own next-generation chips, won't come up with something as good or better.

Even if Motorola's new chip turns out to be everything the company claims, that's no reason to cling to the rest of the semiconductor unit. Motorola says it will license the new technology to other chip manufacturers, a proven route to success in the computer industry. The strategy would enable Motorola to make fat profits on the technology without producing a single chip. If that's the plan, why keep a lot of costly, money-losing semiconductor factories running?